First State Bancorp. in Albuquerque plans to close its two Utah branches by Oct. 31 in an effort to strengthen its capital position and help it weather the economic downturn.
The $3.4 billion-asset company said it would work with customers at those branches to move their $287.2 million in loans and $20.9 million in deposits to other institutions. The closings are not expected to result in a significant charge.
First State has 38 branches in New Mexico, 20 in Colorado, and four in Arizona. It added the two Utah branches by buying First Community Industrial Bank in 2002.
"We never gained the traction around deposit growth in Utah that we anticipated," Michael R. Stanford, First State's chairman and chief executive officer, said in a press release issued late Monday. "This decision, though difficult, will lower our overhead and allow us to reduce our balance sheet by $280 million in loans over a period of time, enhancing our capital strength in the near term."
The company said it is well capitalized but wants higher capital levels because of the difficult banking environment.
Peyton Green, an analyst at First Horizon National Corp.'s FTN Midwest Securities Corp., said in a research note issued Tuesday that the branch closings should improve First State's tangible equity ratio by 51 basis points, to 5.85%.
